Introduction

Hotel prices, along with more traditional bellwethers such as Baltic Dry (and unconventional ones like skirt length), give an indication of current economic trends, and perhaps something of a foretaste of what might yet be.  Our review of the first half of 2011 tells a story of political events, of nature’s impact, of gyrations in business confidence, and indicates both where consumer value lies today, and where the market is betting on tomorrow’s recovery.

In common with most Western economies, global hotel prices continued their path of unspectacular recovery from the pricing trough reached in 2009. After stripping out currency changes and new hotel openings, the price hotels actually charged customers in the first six months of 2011 rose by just 3% globally.  Having fallen to levels not seen since 2004, we have at least moved on, with the average global hotel price finally approaching its 2005 level. 

“Events, dear boy, events….”

2011 has seen the largest impact from political, and even geological, events that we’ve seen in the lifetime of this survey.  The revolutions, violent or otherwise, of the Arab Spring, naturally curtailed demand for a series of important leisure and business destinations, from the resorts of Egypt and Tunisia to business travel to Bahrain.  As properties emptied even in areas not directly involved, hoteliers had no choice but to cut rates to attract business. For UK travellers, hotel prices in Egypt as a whole were down by 25% and the UAE down 13%, with Sharm El Sheikh down 26% and Dubai down 13%, a heavy blow to those tourism-dependent economies, already reeling from the financial crisis.

As the leisure markets of North Africa disappeared from travellers’ minds for a while, demand partially transferred to the traditional European destinations of Spain and Italy, finally breathing life into what had been moribund markets in pricing terms.  Ireland’s moment in the spotlight as recipient of Presidential and Royal visits coincided with the first evidence of recovery after three years of price falls.

The tsunami and nuclear emergency in Japan drove down occupancy, and prices, in one of Asia’s largest hotel markets, with rates in the country falling 9% overall but with individual city prices more radically affected – Kyoto down 19% and Osaka down 29%.  The Asian region would have posted a far higher increase but for the impact of nature here.

Another BRIC in the wall?

If prices are sluggish in the US and Europe, or falling from external shocks, they are rising rapidly in the world’s economic hotspots.  Brazil, up 7%, is a case in point, exacerbated by a lack of new hotels in its major cities with rates in Sao Pãolo rising 27%.  In Asia Pacific, destinations from Singapore to Sydney posted double digit price increases.

We’ve been following what has driven this in the last two HPI reports.  Business and convention travel has staged a revival, filling hotels and prompting recovery. Global spending on business travel is projected to grow another 9.2% in 2011, according to the GBTA Foundation’s latest report, with all four BRIC countries outpacing the more developed economies. 

However, as demand has increased, so has supply, which acts as a brake on prices. There are still nearly 6,000 new hotel projects in development around the world, adding more than 900,000 hotel rooms. New York in particular is leading the way with 20,000 rooms in the construction and planning phases, according to the July 2011 STR Global Construction Pipeline Report. London tops the European chart with over 4,500 additional rooms.  Asia-Pacific hotel development is expanding rapidly with 1,244, and over 300,000 rooms, under construction.  120,000 of these are in China alone.

Hoteliers fear a rise in their local currency

Another feature of this report is how currency exchange rates have created huge variations in whether prices are rising or falling for your pocket. The relative weakness of the US dollar and Pound Sterling is great news for travellers paying in Euros, Australian dollars or Swedish Krona but relatively higher prices in their own countries mean that many visitors will have been deterred.  Thus UK hoteliers can breathe a complacent sigh of relief at the relative weakness of sterling, knowing that their own countrymen are more willing to stay domestically, and that overseas visitors find the UK more affordable.

Wherever you are, and wherever you are going, the HPI should have the data you need, as well as some lighter moments.  Just which nation spends more when it travels than any other?  How many square feet can you get for your money around the world?  And just who are the most adventurous when sampling the local cuisine?  For the answers to all this, and more, read on.